Haven’t Drunk the Cloud Marketplaces Kool-Aid? It’s About Time You Did

Cloud marketplaces aren’t new. That said, they are pivotal to the evolution and profit potential of the indirect channel.

Amazon Web Services set up the industry’s first such exchange platform in 2012. In the intervening years, a number of channel partners – large ones, mainly – have gotten on board with the marketplace movement, expanding their routes to market.

However, none of that means that every partner understands or participates in cloud marketplaces. It’s time to dig into why that probably needs to change. After all, IT research firm Canalys (an Informa company) says that, by 2025, cloud marketplaces will represent a $45 billion opportunity — albeit one that requires shifting traditional sales and buying thinking, and adjusting business models to accommodate the recurring revenue cloud marketplaces generate.

Vince Menzione, CEO of The Ultimate Partner, is here to help the holdouts. On Tuesday, Oct. 31, Menzione will guide Channel Futures Leadership Summit attendees through the ins and outs of cloud marketplaces in his session, Market Makers: Tap Into the Massive Channel Opportunity with Marketplaces. Even though cloud marketplaces – not just from AWS, but also from Microsoft Azure, Google Cloud and even smaller cloud providers including Oracle Cloud, IBM Cloud and others – have been around a while, their ongoing impact on the channel is significant, meriting spirited discussion.

Perhaps the greatest advantage of cloud marketplaces lies in the co-selling aspect. Here, channel partners team with other channel partners, usually with different and specialized expertise that would be difficult to acquire organically. They do so to deliver complete – not piecemeal – solutions to customers (this reflects the much-debated “co-opetition” approach).

What About Smaller Channel Partners?

That’s all well and good but again, cloud marketplaces historically have tailored themselves to serve the largest of channel partners — behemoth consultancies, integrators and managed service providers with global reach. Only recently have hyperscaler marketplace executives started talking about targeting small and medium businesses, rather than enterprises, government agencies and giant corporations, through the channel.

Knowing then, that the AWS/Azure/Google Cloud marketplace crowd appears more keen on smaller channel partners and their customers, now marks the time to take advantage of the “Market Makers” session.

The Ultimate Partner’s Vince Menzione

“The channel is the glue between the hyperscalers and the lower enterprise, midmarket and SMB,” Menzione says. “The opportunity is huge and still not fully realized. I’m bullish that the partners that embrace marketplace will win the ecosystem.”

How to Embrace Cloud Marketplaces

So what does embracing cloud marketplaces look like? For starters, channel partners don’t just have to rely on vendors to develop interesting new apps and services — they can do that themselves. This calls for experienced developers who can bring a vision to life, followed by an effective sales and marketing team that can speak clearly to the benefits of using the app or service in question. From there, revenue can come from the channel partner’s existing customer base as well as from other partners whose clients need said app or service.

Keep in mind that the three largest public cloud providers allow customers to funnel their upfront committed spend into marketplace purchases. End-user organizations have agreed to spend more than $200 billion with the hyperscalers over a certain number of years. That invites big money into channel partners’ pockets, even as enterprises, still reeling from pandemic overprovisioning and battling inflation, cut back on cloud computing adoption. Instead of deploying new infrastructure, more organizations are buying software and cybersecurity from the hyperscalers’ marketplaces.

This, Canalys chief Analyst Alastair Edwards wrote in July, is an attractive way for enterprises to hit their cloud commitments. As such, more than half (52%) of partners Canalys surveyed “recognize that their customers are now either …

… highly likely (23%) or somewhat likely (29%) to buy through one of the top three hyperscaler marketplaces,” Edwards wrote.

Menzione agrees. For partners, then, “massive opportunities” in cloud marketplaces include “getting your product offering in front of the many thousands of enterprise and midmarket customers that have made substantial commitments to the three hyperscalers,” he explains.

Alternatively, if a partner doesn’t want to do the heavy lifting of development, that works. Simply find, package and resell a certain app or service in the cloud marketplace and voilà, you’ve built a personalized offering for your customer — one you’re likely to provision on the holy grail of revenue: recurring.

‘Momentum Is on the Side of Change’

That, however, brings us to a crucial point. Some partners still struggle with the modernization of the channel, the switch from large, one-time chunks of revenue to smaller, ongoing sales. Marketplaces support the latter. While this adds yet another avenue for partners to build those recurring revenue streams, it poses another obstacle for the legacy partners resisting the transition. To that Menzione says: “Change is inevitable, but growth is optional. Seriously, the momentum is on the side of change. The hyperscalers are finding way to address partner concerns. We are still in the early innings.”

If you’re a cloud marketplaces newbie ready to dive in, the best place to start could be the Azure Marketplace.

“All three present opportunities for MSPs to expand their businesses, but … Microsoft has the longest history with building the ecosystem,” Menzione says.

Given that reality, a lot of partners already work with Microsoft, and have for years.

“They are the backbone of the Microsoft ecosystem and Marketplace opens up an opportunity for them to have even greater impact as a [cloud] partner as they can not only sell the Microsoft first-party offerings, but these third-party offerings to their customers,” Menzione adds.

On top of that, the Azure Marketplace stands out with its enterprise reach and lead in the quickly mushrooming AI arena, per Menzione. But that’s not to discount the marketplaces capabilities and programs over at AWS and Google Cloud.

“AWS is clearly the leader with a head start; they have addressed some of the challenges,” Menzione says. “Google is the underdog, playing catch-up with agility.”

Channel Partners Integral to Cloud Marketplaces Growth

Canalys’ Edwards, too, asserts that cloud marketplace growth will, more and more, depend on channel partners.

Canalys’ Alastair Edwards

“Cloud marketplaces are far from the automated, self-service platforms that they were initially expected to be,” Edwards wrote in July. “Most enterprise deals involve complex sales processes and negotiations, often with multiple partners. And as more complex technologies become available on marketplaces, customers are seeking expert partners to help them discover, procure, deploy and manage these technologies. The professional services skills of partners remain critical, as does their ability to support customers throughout technology lifecycles. All three hyperscalers are actively investing in channel strategies and processes, and enabling vendors on their marketplaces to sell through and with channel partners.”

Takeaway? Getting in on the cloud marketplaces action sooner – not later – makes sound business sense.